Tax advantages in Denmark

The Danish tax system offers tax advantages to individuals who are crossing the Danish border. Many foreigners focus on the high Danish income tax rates but this does not show a true picture of the cost when residing in Denmark.

First of all you must look at both the income taxation and the social security contribution cost to understand the full picture of the cost level. Individuals residing permanently in Denmark are subject to a marginal tax rate of up to approx. 55%. However the mandatory social contributions to be paid by an employee in Denmark under the Danish social system is less than 1 % of the salary covering a special labour marked pension contribution which be fully returned at retirement.

In regard to the employers social contributions they are also small typically approx. 2-3 % of the salary. This fact is very important for an employee since the employer looks at his total cost when employing an individual. So in Denmark he only has to add a few percent to the salary offered, which implies a high salary level on almost the whole labour marked in Denmark. You need to understand that employers in the neighboring countries will have to use a factor of 120-130 % of the salary when calculating their cost when employing new people against the cost factor of 102-103 %. Bear this in mind when you consider an employment offer in Denmark.

In addition to this Denmark offers a special expat taxation for many high salaried employees and researchers of a flat rate taxation of approx. 32 % of the salary for the first 7 years of Danish tax residency. Still remember also the standard small social contributions are also applied.

Now you have the full picture of the Danish tax level on salary.

Return on financial values (including interest, dividends and capital gains) are typically subject to a taxation from 27-42 % . However in many cases this taxation can be significantly reduced by offsetting interest expenses and by taking tax planning advice.

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Ditdanmark.com is managed by Inwema. Chief executive and tax lawyer Hans Birkholm has more than 30 years experience with international taxation. We provide full concept international tax advisory services.